Refund of tax paid under cancelled assessments was upheld, and a sales tax waiver supported return of amounts already realised.

Amounts paid under assessment orders and demand notices became refundable once those assessments were cancelled in appeal, because the demand lost its legal basis and could not be retained absent a stay or specific statutory protection. Section 44 of the Kerala General Sales Tax Act was held not to cover that situation. The Government order waiving collection of sales tax on inter-State sales of rubber before 1 June 1978 also supported refund of sums already realised for that period, and prior payment did not defeat the claim. The refusal of refund was held unsustainable, and refund was directed with costs.

---

---

Issues: (i) Whether tax paid pursuant to assessment orders and demand notices, once those assessments were cancelled in appeal and the matters remanded, became refundable; (ii) Whether the Government order waiving collection of sales tax on inter-State sale of rubber prior to 1 June 1978 prevented the petitioner from obtaining refund of amounts already paid.

Issue (i): Whether tax paid pursuant to assessment orders and demand notices, once those assessments were cancelled in appeal and the matters remanded, became refundable.

Analysis: When an assessment is set aside or cancelled in appeal, the demand founded on that assessment loses its basis and becomes ineffective unless recovery is protected by a stay or a specific statutory provision. The taxing authority cannot retain amounts collected under a demand that has ceased to survive merely because fresh assessments may later be made. Section 44 of the Kerala General Sales Tax Act, 1963 was held not to cover this situation.

Conclusion: The amounts paid towards the cancelled assessments became refundable, and refusal of refund was legally unsustainable.

Issue (ii): Whether the Government order waiving collection of sales tax on inter-State sale of rubber prior to 1 June 1978 prevented the petitioner from obtaining refund of amounts already paid.

Analysis: The waiver order was construed as covering the collection of tax on the specified transactions for the relevant period. The Court treated the order as supporting the claim for refund and rejected the stand that prior payment of tax excluded refund. It also accepted that denying refund to those who had paid would place them in a worse position than those who had not paid, creating an impermissible disparity.

Conclusion: The Government waiver order supported the petitioner's entitlement to refund, and the rejection of refund on that ground was erroneous.

Final Conclusion: The petition succeeded, the impugned refusal was quashed, and refund of the amount paid was directed with costs.

Ratio Decidendi: Once an assessment demand is annulled in appeal, amounts paid in pursuance of that demand become refundable unless recovery is specifically protected by stay or statute, and a waiver of collection for a defined period supports refund of amounts already realised for that period.

---